West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.65 during early Asian trading hours on Tuesday. The price of WTI crude oil is drifting higher amid geopolitical risks. Traders are awaiting the release of the American Petroleum Institute (API) crude oil inventories report on Tuesday for fresh momentum.
Russia accused Ukraine of launching a drone attack on the Russian presidential headquarters in northern Russia, prompting Moscow to reconsider its position in peace negotiations, Reuters reported on Monday. Ukraine rejected Russian statements about the drone attack, and its foreign minister said that Moscow was seeking “false justifications” for more strikes against its neighbor. Fading peace hopes in Ukraine could support the price of WTI in the near term.
“Unless Russia surprises the world by backing away from previous demands regarding territory and security guarantees, we look for the complex to rise over the rest of this week and next,” oil trading consultancy Ritterbusch & Associates said.
Additionally, US President Donald Trump warned on Monday that the United States would launch another major military strike on Iran if Tehran is found to be rebuilding its ballistic missile or nuclear weapons programs, while also issuing a stark ultimatum to Hamas to disarm or face dire consequences. Renewed tensions with Iran increase the potential for higher oil risk premia and higher WTI prices.
On the other hand, concerns about a global glut may limit the downside for black gold. The Organization of the Petroleum Exporting Countries (OPEC+) and its allies (OPEC+) agreed to a modest increase in production by 137 thousand barrels per day for the month of December.
Frequently asked questions about West Texas Intermediate crude oil
West Texas Intermediate oil is a type of crude oil that is sold in international markets. WTI stands for WTI, and is one of three main types including Brent and Dubai crude. WTI is also referred to as “light” and “sweet” due to its relatively low gravity and sulfur content, respectively. It is considered a high quality oil and easy to refine. It is sourced from the United States and distributed through the Cushing Hub, considered the “pipeline crossroads of the world.” It is a benchmark for the oil market and the price of WTI is frequently quoted in the media.
Like all assets, supply and demand are the main drivers of the price of WTI. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and affect prices. Decisions by OPEC, a group of major oil-producing countries, are another major driver of the price. The value of the US dollar affects the price of WTI, as oil is mostly traded in US dollars, so a weak US dollar can make oil more affordable and vice versa.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) influence the price of WTI. Changes in inventories reflect fluctuations in supply and demand. If data shows a decline in inventories, this could indicate increased demand, leading to higher oil prices. High inventories can reflect increased supply, causing prices to fall. The API report is published every Tuesday and the EIA report the next day. Their results are usually similar, falling within 1% of each other 75% of the time. EIA data is more reliable, because it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 oil-producing countries that collectively decides production quotas for member countries at meetings held twice a year. Their decisions often affect WTI prices. When OPEC decides to cut its quotas, it can tighten supply, causing oil prices to rise. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten additional non-OPEC members, most notably Russia.
